Economic woes of Pakistan
Economy is the engine of a country.Basically it's a network of producers,distributors and consumer of goods and services on regional or national level.
But the question that comes to the mind of a common man is how economic system developes?what are the factors contributing it's growth. What are the challenges that an economy confronts?
In simple words I can say that it is society which delvelopes economic system with its legal and political structure. We have maket based economy in Pakistan and forces of supply and demand determine which products and services need to be produced and set price as well. A suitable administrative system is crucial for its working. Political stability brings foreign direct Investment and creates job. A strong tax system contribute a lot. In a nutshell natural resource,human resource (skilled and trained) technological advancements, political and social system foster the growth and output of an economy.
However,Pakistan economy is facing certain woes :
Dwindling foreign exchange reserves(17.938billion dollar)
Low exports
High inflation (9.4percent)
Growing fiscal deficit
Current account deficit(18.2billion dollar in 2018)
Depreciation of Pakistani rupee against US dollar
Trade deficit
External debt( It has increased from US $64.1 billion in June 2018 to US $ 65.8 billion in June 2019)
Low FDI
Increased defence spending
Poorly regulated financial system ( it facilitates tax erosion.The country has been struggling to broaden the tax base with what the FBR chairman said only one percent of the people carrying the burden of the entire state. Despite all efforts and punitive taxation, less than two million people out of 220 million population have so far been encouraged to file return).
Resultantly,country finds itself knocking on the doors of the International Monetary Fund for what will be its 22nd loan.
Pakistan already owes the IMF billions from previous programs. Indeed, 30.7% of Pakistan’s government expenditure is earmarked for debt servicing,
A change in governing system must be anchored to a strong foundation of macroeconomic stability and overall peace and security in which all people and sectors of the economy can realise their potential and move forward
According to the World Bank’s Ease of Doing Business report, Pakistan ranks 136th out of 190 economies. To improve this ranking and draw more investment, Pakistan should ease customs laws and regulations, improve the security of the country, and rebrand and boost its international image as a desirable destination for tourism and industry. It should also encourage domestic investment through more flexible tax policies, particularly targeting small and medium-sized enterprises (SMEs).
Pakistan’s economic crisis cannot be resolved overnight. Support from the IMF and friendly countries like Saudi Arabia, China, and the UAE will only provide some breathing room in the short term to its shattered economy. Promoting manufacturing by creating a more investment-friendly environment, broadening its tax base, and encouraging innovation and modernization in export-led industries are just some of the most urgent measures that can be taken to address the growing fiscal and current account deficit. Pakistan must take advantage of this moment to restore a truly stable and sustainable economy.
But the question that comes to the mind of a common man is how economic system developes?what are the factors contributing it's growth. What are the challenges that an economy confronts?
In simple words I can say that it is society which delvelopes economic system with its legal and political structure. We have maket based economy in Pakistan and forces of supply and demand determine which products and services need to be produced and set price as well. A suitable administrative system is crucial for its working. Political stability brings foreign direct Investment and creates job. A strong tax system contribute a lot. In a nutshell natural resource,human resource (skilled and trained) technological advancements, political and social system foster the growth and output of an economy.
However,Pakistan economy is facing certain woes :
Dwindling foreign exchange reserves(17.938billion dollar)
Low exports
High inflation (9.4percent)
Growing fiscal deficit
Current account deficit(18.2billion dollar in 2018)
Depreciation of Pakistani rupee against US dollar
Trade deficit
External debt( It has increased from US $64.1 billion in June 2018 to US $ 65.8 billion in June 2019)
Low FDI
Increased defence spending
Poorly regulated financial system ( it facilitates tax erosion.The country has been struggling to broaden the tax base with what the FBR chairman said only one percent of the people carrying the burden of the entire state. Despite all efforts and punitive taxation, less than two million people out of 220 million population have so far been encouraged to file return).
Resultantly,country finds itself knocking on the doors of the International Monetary Fund for what will be its 22nd loan.
Pakistan already owes the IMF billions from previous programs. Indeed, 30.7% of Pakistan’s government expenditure is earmarked for debt servicing,
A change in governing system must be anchored to a strong foundation of macroeconomic stability and overall peace and security in which all people and sectors of the economy can realise their potential and move forward
According to the World Bank’s Ease of Doing Business report, Pakistan ranks 136th out of 190 economies. To improve this ranking and draw more investment, Pakistan should ease customs laws and regulations, improve the security of the country, and rebrand and boost its international image as a desirable destination for tourism and industry. It should also encourage domestic investment through more flexible tax policies, particularly targeting small and medium-sized enterprises (SMEs).
Pakistan’s economic crisis cannot be resolved overnight. Support from the IMF and friendly countries like Saudi Arabia, China, and the UAE will only provide some breathing room in the short term to its shattered economy. Promoting manufacturing by creating a more investment-friendly environment, broadening its tax base, and encouraging innovation and modernization in export-led industries are just some of the most urgent measures that can be taken to address the growing fiscal and current account deficit. Pakistan must take advantage of this moment to restore a truly stable and sustainable economy.
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